India’s petroleum export earnings drop due to global slowdown

  • Earnings from exports of chemicals and petroleum products stood at $75.01 billion in the April-February FY24 period, down 9.69% from $83.06 billion in the year-ago period.

Rhik Kundu
First Published21 Mar 2024
 India's export earnings from petroleum shipments fell steeply during the first 11 months of FY24. (Photo: Bloomberg)
India’s export earnings from petroleum shipments fell steeply during the first 11 months of FY24. (Photo: Bloomberg)

New Delhi: India's export earnings from petroleum shipments fell steeply during the first 11 months of fiscal year 2024 due to the global economic slowdown, a rise in domestic consumption, and shrinking discounts on Russian oil.

During FY2023, India, despite not being a major petroleum producer, expanded its export markets for refined petroleum products helped by the availability of cheap Russian oil and a demand for value-added petroleum products from countries in Europe, West Asia and North Africa.

According to data from the commerce ministry's Niryat portal, earnings from exports of chemicals and petroleum products stood at $75.01 billion in the April-February FY24 period, down 9.69% from $83.06 billion a year ago.

The price of Russian oil fell following western sanctions over the country's invasion of Ukraine in February, 2022. Earnings from exports of chemicals and petroleum products stood at $53.85 billion during the April-February FY22 period.

During the first 11 months of FY24, earnings from exports to Europe rose but not enough to balance out declines in shipments to Africa, West Asia-North Africa (WANA) and South America.

India emerged as a leading buyer of discounted Russian crude oil and an important exporter of refined petroleum products to Europe.

However, discounts on Russian crude oil have been shrinking.

According to a PTI report, the discount on Russian Urals grade has narrowed from around $30 a barrel in FY23 to about $4 per barrel in FY24.

Meanwhile, a slowdown in advanced economies, including in Europe, a major export market for Indian petroleum exports, has impacted demand.

On the other hand, higher domestic consumption means more of the imported crude is being utilized within the country.

According to a recent report by Fitch Ratings, the demand for petroleum products in India rose by 5% annually in the first nine months of the financial year ending March 2024 (FY24), following a substantial 10% post-pandemic recovery in FY23.

"Petrol and diesel sales both increased ... due to heightened economic activities that drove demand from the agriculture and power sectors and spurred a rise in holiday travel and auto sales," the report added.

Data from the ministry of petroleum and natural gas's Petroleum Planning and Analysis Cell states India's domestic consumption of petroleum products stood at around 212 million metric tonnes during the April-March (FY2024) period, up from 201 million metric tonnes during the corresponding period of the previous fiscal.

“However, as advanced economies recover in the coming quarters, India's petroleum exports are expected to pick up,” said a senior government official, who didn't want to be named.

The price of Brent crude stood at $85.71 a barrel on Thursday, up 15.29% over the year.

Meanwhile, the Indian Rupee stood at 83.15 against the dollar on Thursday. A year ago, on 21 March 2023, the Rupee closed at 82.68 against the dollar.

 

 

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